New Mexico oil and gas drilling plummets - New Mexico Business Weekly:

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Jason Sandel, executive vice president of in said the sudden reduction in activityu since last fall hasbeen startling. “The number of drilling rigs that have shut down almost instantaneously throughout all companiesand operations, combined with the length of time producers say they will remain down, make this situation unique,” said Sandel, who is also a Farmingtonm city councilor. “There were some tough timew in the 1980s and butwhat we’re facing right now is abouf the worst we’ve experienced.” When drillingh activity drops, everything else followws close behind, Sandel said.
As of mid-January, 24 of the 41 drillinh rigs assigned to the San Juan Basin in northwesterhn New Mexico hadceased operations. “Drillingg is always the firsyt service impacted in a Sandel said. “Everything else follows becauseif there’s no then there’s no equipment or water to be hauleds and no compressors to operate. The idlin of drilling rigs is reallt justthe beginning.” Free-falling price are a major problem. Oil for Februar y delivery fellbelow $35 per barrel this week on the , down from a peak of $147 per barrelk last summer. And, natural gas prices are currentlyearningf $4.
83 per 1,000 cubic feet, comparefd to more than $6 per MCF last Industry representatives also blame adverse environmental regulations, especially new stat rules on the management of oil-and-gas pits that took effect in New Mexico last “The overzealous and out-of-control regulatory environment makea it very tough to do businessz in New Mexico,” said Bob Gallagher, president of the . “I’df say that’s even a bigger concern than price instability.” Sandel said restrictive regulations and declinin g prices make for akiller combination. “I see it as the perfec t storm,” Sandel said.
“Both declining pricews and the rising cost of doing businesa are causingthe downturn.” Estimates on layoffs are not yet said Margaret McDaniel, director of the . “Thse numbers are just startintg totrickle in, but basically everything is slowing McDaniel said. Sandel said at least 552 drillingg workers have been laid off in the northwestern quadrant of the since each drilling rig includes 23 workers and and 24 rigs are currently shut down in the San Juan The layoffs include 200of Aztec’es 750 employees, Sandel said. Texas-based the largest natural gas producer in the San JuanBasinj — announced on Jan.
16 that it will lay off abouty 4 percent of its globalwork force, or nearlty 1,350 employees worldwide. “There haven’t been any layoffsw in New Mexico yet,” said spokesman Jim “We need to first assess where it willtake effect, but we’llo make those announcements in a few The situation is similar in the Permian Basinh in southeastern New Mexico, said Raye Mille of Artesia-based “The southeast part of the state is seeing significangt reductions in rig activity,” Miller said.
“We had five rigs contractedx to us last year andnow we’re down to We’re about to go down to three, and if prices don’t improve, we’ll go down to two in the next few Most other companies operating in the Permian Basij are also cutting including and , Miller “The situation is basically the same for all companiews in the area, and if production companie s are cutting back, then the servicr companies that work for them are also cutting back. It’s happenin g pretty much acrossthe board.
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